Financial Daily from THE HINDU group of publications
Tuesday, Dec 16, 2003
Industry & Economy
Coimbatore foundry body ready for pact on raw materials
Coimbatore , Dec. 15
EVEN as the tiny and small foundry units in Coimbatore district downed shutters today to protest against the abnormal increase in raw material price, the association representing them has come forward to sign a Memorandum of Understanding with any canalising agency for regular purchase of raw materials.
While the association members are willing to make down payment while lifting the raw material stock, they are not in favour of paying any commitment charges in advance to the agency taking up the raw material distribution work since they could not afford to shoulder substantial financial burden.
Speaking to Business Line here, Mr P. Udayakumar, Secretary, the Coimbatore Tiny and Small Foundry Owners Association (COSMAFAN), said that the indefinite closure of foundries was a success with all the member units downing shutters. The association has also sought the intervention of the Union Government to ensure regular supply of raw materials mainly pig iron and coke to the industry at a reasonable price.
He said the association, in a letter to the Tamil Nadu Chief Minister early this year, had pointed out that the Tamil Nadu Small Industries Development Corporation (TANSIDCO) had been distributing coke from 1980 to 95 and pig iron was supplied by Central Government agencies during 1990- 95.
But in the wake of the liberalisation policy, Government organisations like SAIL had shifted to production of value added items. The association had been pleading with TANSIDCO to take up the job of supplying pig iron and coke for the past eight years but of no avail.
Mr Udayakumar said the nearly 500 tiny and small foundry units in the district required around 15,000 tonne to 20,000 tonne of pig iron every month. The coke requirement was in the region of 2,000-2,500 tonne a month. While pig iron was supplied by the manufacturers in the South, the foundry grade coke was mostly imported from China.
The manufacturers of pig iron had been regularly hiking the price and the metallurgical coke also was becoming dearer by the month. This eroded the price competitiveness of the small foundries in the region as they had to enter into annual contracts with their buyers and were not able to raise the price every time the raw material costs shot up.
While China was able to supply rough castings at about Rs 8,500 a tonne, in India even one of the raw materials pig iron costs nearly double of that at Rs 16,000 a tonne. How could the Indian industries be price competitive, he asked.
Mr S. Rajarethinam, Managing Director, TANSIDCO, Chennai, said his organisation was willing to take up the responsibility of supplying raw materials to the foundry industry for which it wanted details like the actual requirements etc. He also wanted the industry to make commitment charges so that the corporation was not taken by surprise later by any shift in the preference of the buyers because of price undercutting by the private traders.
Responding to this suggestion, Mr Udayakumar said the foundry association was ready to sign a pact with NSIC or TANSIDCO on the quantity of the raw materials the members would lift from either of the suppliers every month. The association members also would make full payment at the time of lifting of stock.
But he felt that payment of commitment charges by the industrial units may not be feasible since it would involve a considerable financial outgo which the small and tiny units could ill afford. He also felt that government should view this as a service to the SSI units that played a crucial role in employment generation.
Mr Tee. Narayanaswami, President, Coimbatore District Small Industries Association (CODISSIA), expressing solidarity with COSMAFAN, said their decision seemed to be `inevitable.' The small and tiny foundries had withstood acute industrial recession and when their fortunes seemed to be looking up due to industrial revival, the raw material cost increase had dealt them a crippling blow.
He suggested that the export of iron ore, pig iron, steel sheets etc may be curtailed till domestic prices stabilised and import duty on them be brought to nil to ensure easy availability.
Mr G. Rajendran, President, Southern India Engineering Manufacturers' Association (SIEMA), voicing his support to COSMAFAN, said a joint meeting of SIEMA, Indian Institute of Foundrymen (IIF), Coimbatore chapter, the Indian Chamber of Commerce and Industry, Coimbatore and CODISSIA is being convened in the next few days to decide on observing a day's strike or fast to express their support to the agitating COSMAFAN members.
Though the problems highlighted were common to all the engineering units, he said the SIEMA members were not able to join the indefinite strike in view of their commitments to their buyers both within and outside the country.
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